Actually you can't say there is a bigger demand one way or another for a bigger screen or not.
What you can say is there is a demand for an iPhone, lots of iPhone users like the current screen size, lots want a bigger screen. But currently the biggest there is is 4 inches. So if you want an iPhone it is 4 inch screen or nothing.
The majority of iPhone users love the os and won't leave even if they don't like the screen size.
So we have no idea what the bigger demand is for a bigger screen until apple releases one.
Actually, yes I can say there is a bigger demand for this size vs. a bigger iPhone because we still have this size iPhone. We're not talking rocket science here man, this is simple market research and business 101...the majority controls the market with ANYTHING sold to consumers, and Apple, as a company, follows these trends to maintain customer satisfaction. If the higher demand was for a 5" screen phone over the market spectrum of iPhone, we'd have a 5" iPhone. It's so basic man, it doesn't take an inside source or crystal ball.
"One product already juggernauts the competition each year, so why complicate that?"
Maybe in the past, but not now. There are some very good products out there now. Plus, they do multiple size iPads, so why not iPhones?
It still does it now...just watch later this month (we all know what's coming). No one said other phones weren't good products...the Galaxy S line of phones is a great addition to the market, but the iPhone will still choke slam the market upon release...in numbers you just don't see from ANY other phone singularly.
The iPad was a different scenario...one where they went SMALLER to rival the "phablet" sales numbers. THAT is the only reason the iPad Mini came into existence...they even talked about this shortly after it's release, how they saw a market segment that the iPhone didn't fit in, but a smaller iPad would at least rival (meaning the Note segment, even without phone function).